04/15/2008
Bend, Oregon Resident and Corporation Sentenced in Securities Fraud Scheme
Michael Rich, former President and Chief Executive Officer of Pac Equities, Inc., is sentenced to serve 20 years in prison for fraudulent scheme
Eugene, Ore. – Michael Marks Rich, former President and Chief Executive Officer of Pac Equities, Inc., was sentenced to serve a 20 year term of imprisonment today by United States District Judge Michael Hogan for securities fraud related offenses. He was also ordered to pay restitution in the amount of $10,362,680.81 to the victims of his fraud. Rich and Pac Equities were found guilty by a jury on December 10, 2007, of securities fraud, wire fraud, and mail fraud. Additionally, the jury found Rich guilty of bank fraud, attempted bank fraud, money laundering, obstruction of justice and tax fraud. The verdicts were returned after a ten day trial before Judge Hogan. Rich is 71 years of age, and prior to his arrest in this case he resided in Bend, Oregon. He is also known as Richard Forbes Williams and Michael Richard Brown.
The sentence was enhanced for a number of reasons including the large number of victims (over 300), the sophisticated nature of the scheme, the leadership role Rich played in the scheme, and because Rich obstructed justice by failing to disclose assets and by wasting assets which belonged to victims of his scheme.
The securities fraud charges were based upon the real estate investment contracts which were sold based upon misrepresentations by Rich and Pac Equities. The bank fraud charge was based upon misrepresentations Rich made to Countrywide Bank National Association to obtain a $149,905 loan. The attempted bank fraud charge was based upon misrepresentations Rich made to obtain $20,000 in cashier’s checks from the Bank of Hawaii. The wire fraud charges were based on misrepresentations made via the Internet and other means to obtain a $600,000 loan from Countrywide Home Loans, and to obtain wire transfers from investors. The mail fraud charges were based upon misrepresentations made via the mail to obtain money from investors. The money laundering charges were based upon Rich’s use of investor money to pay personal expenses. The financial transactions engaged in by Rich as alleged in the money laundering counts exceeded $7,000,000. The obstruction of justice charges were based upon evidence Rich concealed from investigators, the Court, and a Receiver in the case. The tax fraud charges were based upon $139,500 Rich failed to report to the IRS in 2003 and $155,000 Rich failed to report to the IRS in 2004.
During the course of the offenses, Pac Equities had an office in Bend, Oregon, and purported to manage profitable real estate development projects, including a subdivision in Phoenix, Arizona, a high-density townhouse development in Salem, Oregon, a dairy in Culver, Oregon, a resort complex in Ocean Shores, Washington, commercial buildings in Redmond, Oregon, and an industrial park in LaPine, Oregon. Rich and Pac Equities also purported to make profitable loans. They facilitated these activities by soliciting investors to invest in real estate development projects and loans with the promise of annual returns of 10% or more, which were paid on a monthly basis. They represented that the investments were secured by trust deeds and always had at least 30% in equity, with no more than 70% loan to value ratio. The evidence at trial, however, showed that in selling real estate investment contracts, Rich misrepresented a variety of things about his educational background, his employment history, and the nature and security of the contracts, which caused over 300 people to invest over $18,000,000 with Pac Equities.
Rich and Pac Equities created the facade of a successful business by using investor principal to make monthly payments to investors. They represented that these payments constituted interest earned from profitable investment and loan activity. They used this facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans. These amounts were insufficient to meet monthly interest obligations which Pac Equities owed its investors.
"It can be devastating when the financial well-being of an individual falls into the wrong hands through trickery and deceit," said Kenneth Hines, the IRS Special Agent in Charge for the Pacific Northwest. "The days are numbered for those who peddle false hopes and dreams, and prey on investors for their own personal financial benefit."
The case was the result of an investigation by the Internal Revenue Service, Criminal Investigation Division, the Federal Bureau of Investigation, and the State of Oregon, Department of Consumer and Business Services, Division of Finance and Corporate Securities. The case was prosecuted by Assistant United States Attorney Sean B. Hoar.
